Hello all: when interviewing with a new fund in a sector that's very overheated (ie a 'winner' in the pandemic), how do you stay bullish and positive on the prospects, when it feels like they're probably late to the party? Being in this sector for 6 years dealing directly with buyers and sellers, I can't see much more room to run in cap rate compression. And when they're generally core, long-term, net-leased properties, you can't really lean on the asset management / operational acumen as a generator of excess return.
Or do you be brutally honest about the challenges in deploying significant capital in an asset class that many others are chasing (and where many others have a significant head start)? The fund has a second mandate with a more out-of-favor asset class where the existing principal has expertise and has been making deals, and I'm going to be the lead on this very overheated class. He must be bullish on the prospects for this overheated class if he's raising/deploying new capital into it, so how do I reconcile what I think he wants to hear and what I really think? I'm an investment sales broker in the niche asset, and see firsthand the crush of capital/buyers/brokers who have followed the money into the class in the past 18 months. Being a broker, the expectation is that I'm a fountain of optimism, bullishness and boosterism for it - will I show a 'keen eye' by being honest about what I've seen? Or do I just smile, and say yeah market was 6-cap in 2018, 5.5-cap in 2019, 5.0-cap in 2021 and will be 4.5-cap in 2022-2023?
Thank you in advance to this terrific community!
